AAII Sentiment Survey: Bullish Sentiment Dips Back Below Average

The percentage of individual investors describing their short-term outlook for stocks as “bullish” is back below its historical average, as it has been throughout most of this year. The latest AAII Sentiment Survey also shows increases in neutral and bearish sentiment.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 1.8 percentage points to 37.9%. The historical average is 38.5%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 0.8 percentage points to 34.1%. This is the 25th consecutive week that neutral sentiment is above its historical average of 31.0%.

Bearish sentiment, expectations that stock prices will fall over the next six months, rebounded by 1.0 percentage points to 27.9%. Pessimism is below its long-term historical average of 30.5% for the fifth time in six weeks.

This is the 36th week this year with a bullish sentiment reading below its historical average. At current levels, all three sentiment readings are well within their typical ranges.

Political drama in Washington remains at the forefront of many individual investors’ minds. (Many are skeptical about the prospects of tax reform being passed.) Valuations are also playing a role, creating concern among some about stocks being overpriced and potentially leading to a correction. Similarly, there are concerns about the current lack of volatility being followed by a downward price move. Some individual investors, however, are encouraged by the continuing economic and earnings growth as well as the market’s upward momentum.